8th Pay Commission: Why defence employees’ body wants changes in inflation index used for DA, DR calculations
1/5
AICPI-IW is the current benchmark for DA and DR calculation
The All India Consumer Price Index-Industrial Workers (AICPI-IW) is used to calculate dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners. The 12-month average of this index is taken into account to calculate dearness allowance (DA) for central government employees.
2/5
What did defence employees’ body find wrong with the AICPI-IW index?
In a second supplementary memorandum submitted to the 8th Pay Commission, All India Defence Employees’ Federation (AIDEF) has said that the CPI basket revised in 2022-23 does not adequately capture rising prices of food commodities and seasonal agricultural products.
The defence employee body says that the revised CPI basket food and beverages account for only 36.75% weightage compared to 45.86% under the index in 2012. It further argues that the revised basket assigns greater weight to housing, healthcare, transport, communication, recreation and digital services. It says that many of these items exhibit relatively stable prices compared to food commodities and seasonal agricultural products.
The defence employee body says that the revised CPI basket food and beverages account for only 36.75% weightage compared to 45.86% under the index in 2012. It further argues that the revised basket assigns greater weight to housing, healthcare, transport, communication, recreation and digital services. It says that many of these items exhibit relatively stable prices compared to food commodities and seasonal agricultural products.
3/5
AIDEF says current inflation index may not reflect actual household expenses
According to AIDEF, the revised CPI basket gives greater importance to items whose prices are relatively stable compared with food and seasonal products.
"This issue is particularly relevant for lower-paid employees and pensioners. Many central government employees and pensioners spend a higher proportion of their income on food, medicines, healthcare, essential household items, house rent and education. Consequently, they may experience a higher rate of inflation than that reflected in the revised CPI," says AIDEF in its memorandum.
"This issue is particularly relevant for lower-paid employees and pensioners. Many central government employees and pensioners spend a higher proportion of their income on food, medicines, healthcare, essential household items, house rent and education. Consequently, they may experience a higher rate of inflation than that reflected in the revised CPI," says AIDEF in its memorandum.
Amazon Top Deals
POWERED BY
4/5
Impact on pensioners: Why AIDEF wants a review of DR calculation
AIDEF says pensioners spend a larger share of their income on food, medicines, medical treatment, health insurance and caregiving services. If these expenses rise faster than overall CPI inflation, pensioners may lose purchasing power despite receiving periodic DR hikes.
5/5
What are AIDEF's suggestions for a revised index?
The defence employees' body has proposed a new employee-specific cost-of-living index, using changing expenditure patterns while deciding future fitment factors, and giving greater recognition to elderly-care expenditure in determining compensation under the 8th Pay Commission.